Thursday, 23 March 2017

More sloppy thinking from the hard Brexit zombies

The trade benefits of belonging to the European Union have been "largely imaginary", according to the social policy think-tank Civitas. Its analysis argues that exports from non-EU countries to the single market have grown faster than the UK's, since its creation in 1993. That, apparently, lends weight to the argument that no EU deal is better than a bad deal.

Michael Burrage, the report's author, said that before joining the single market in 1993, the UK's exports to the EU grew at a faster rate than major economies such as the US, Canada, Australia, Switzerland, Norway, South Africa and Brazil.

The flaw in this thinking is that trade growth will always reach a plateau inside any particular framework. In the early nineties when we enacted the single market we removed a dramatic number of barriers to trade which saw an increase in exports to the EU. After that, there are far fewer barriers to remove so you reach a stage of trade normalisation where volumes reach their optimal capacity. Further increments come from innovations in technology or regulatory interventions.

For the rest of the world however, the barriers remained in place and have only been removed on a piecemeal basis. Over the years, the EU has secured a number of bilateral deals that have proportionately increased trade for third countries at a rate faster than our own. They are seeing the same surge we saw when the barriers came down.

Growth rates in isolation tell you absolutely nothing. You have to look at it as a whole to see which products were being shipped under what tariff regimes, what non tariff barriers they encountered and then you have to look at other trends in market demand.

The truth of the matter is that Civitas never entered this exercise with any other intention than to show the single market has illusory benefits. Their report contains a number of rhetorical tricks and dishonest games with numbers.

The best they are able to say, were they approaching it honestly, is that progress on liberalising trade within the EU has stalled. Nobody could or would dispute that. But all the same, inter-EU trade is fairly liberal so far as trade in goods go. That much is unarguable.

As you probably know by now there is far more to trade and the single market than just tariffs and customs systems. As much as anything the system works well because it runs on a series of systems that buyers and sellers have confidence in. It is that which makes for trusted trading environment. Sitting atop of this are a number of agencies working to ensure supply chains are free of corruption and able to detect fraudulent and counterfeit goods. The value of that is seldom ever accounted for. Without it, the losses would be massive.

What Civitas doesn't say is how we would improve matters by disengaging from all of this. Assuming one could could say in all honesty that EU trade has grown as far as it is ever going to, how does erecting barriers with the EU improve the situation? The answer, obviously, is that it doesn't.

I voted to leave the EU because I know that the UK can do more with trade. We are a services economy and we don't have as much manufacturing to protect as France or Germany. By entering bloc deals we end up losing market access for our services because France won't open up their markets to foreign competition. More to the point, large bloc deals of the type the EU favours take several years and very often fail. It's a bad system and things are done differently now.

That, however, does not mean we can afford to casually throw away our trade with the EU. Almost half of our trade is with the EU and on balance I do not think there is much value in closing ourselves off from EU competition. If we are to leave the EU then it should be to use our new position to augment and enhance non-EU trade. Nowhere does it say this must be a binary choice between the EU and the rest of the world. We can have both so long as we maintain a high level of convergence and integration with the EU.

With the USA being as impenetrable as it always has been, the EU has become the main global regulatory superpower and most countries are now bringing their regulatory regimes into line with the EU baseline. There is nothing to be gained by leaving the single market and having a bonfire of regulations. There is no trade miracle to be had.

Any progress will be by way of a number of parallel multilateral negotiations with regard to specific products and sectors. On an incremental basis we then make progress while the EU is still lumbering around looking for silver bullets like the ill fated TTIP. It is not necessary to leave the single market to do that.

Civitas has it that leaving the single market will allow us to relax our rules on trade in services. This is a misnomer. EU rules on trade in services are considered incomplete and are in fact the holy grail to complete the single market. In this though it is using global frameworks which are presently becoming the norm in commercial contracts. The private sector is well ahead of governments in this regard. India has expressed an interest in creating a WTO agreement on trade in services to bring about a global single market. That is exactly what we want to nurture and we should join with the EU and India in pushing for exactly that rather than undermining it with bilateral deals.

It should be noted though that Civitas has no interest in what is actually going on. It is running a propaganda effort for hard right Tories who believe that there is a trade miracle to be had by severing all links with the EU and having that bonfire.

They have been pushing for the WTO option since long before the referendum and have never had any interest in a well managed and careful departure from the EU. They are nihilistic wreckers incapable of reason and have been deaf to any pertinent information. They still maintain that the USA trades with the EU on WTO terms despite the fifty or so agreements in the EU treaties database. With such wilful refusal to engage in honest debate there is no point arguing with them. They are contemptible.